Dubai: HSBC Middle East and Standard Chartered, two leading international banks operating in the UAE, have started offering cross border trade settlements in the Chinese yuan in the Middle East.
The new development will allow regional firms to make direct payments between regional currencies including the UAE dirham and the yuan in trade transactions that are expected to boost trade between China and the Middle East.
HSBC Middle East completed its first cross border yuan trade transaction this week.
The bank worked with Royal Palace Furniture, a UAE based retailer, to complete a yuan transaction with its suppliers in China.
"Businesses in the Middle East view China as one of the most important growth markets for trade in the next six months. The ability to settle trade and other international payments in yuan gives clients more flexibility when determining payment terms with their supplier base in China, thus creating the potential to open up new opportunities for expansion into Asia, said Simon Vaughan Johnson, Regional Head of Commercial Banking, HSBC Middle East and North Africa (Mena).
Standard Chartered has signed yuan cross border trade settlement account agreements with five Mena based banks. The move will allow these banks to open yuan accounts in China and facilitate trade activities between these banks and China. The five banks are: Alinma Bank Saudi Arabia, Bank Al Falah Pakistan, BankMed Lebanon, Habib Metropolitan Bank Pakistan and Union Bank Jordan.
The agreements were signed at the "Annual Thought Leadership Middle East and North Africa (Mena) Bankers Conference 2010" which is taking place in Beirut, Lebanon.
"There are many opportunities presented to banks in the region as their corporate clients can request settlement of invoices in yuan.
"As the trade volume between China and the Mena region continues to grow significantly year on year, we feel that banks in the region should be prepared to meet the increasing yuan requirements of their corporate clients," said Farooq Siddiqi, Regional Head of Transaction Banking Mena, Standard Chartered Bank.
Previously, settlement in yuan for cross border trades was only permitted between five pilot cities in mainland China, Hong Kong, Macau and the member countries of the Association of Southeast Asian Nations. Last June, the People's Bank of China (PBOC), China's central bank, opened the programme to a further 20 provinces as well as countries around the world.
China, which is seeking to reduce reliance on the US dollar in trade and investment, started to allow businesses to use yuan in cross-border trade in July 2009.
In the past two months, China has started yuan spot trading versus Malaysia's ringgit, allowed offshore trading of the currency in Hong Kong and announced the opening of its bond market to foreign banks.
Cross-border trade using China's currency more than doubled to 48.7 billion yuan ($7.2 billion, Dh 26.44 billion) in the second quarter from the first, according to central bank data.
